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In May 2016, Bruno Plc (which prepares financial statements to 31 st December) guaranteed a Ghs100,000 bank loan provided to Nora Ltd. Nora Ltd was

In May 2016, Bruno Plc (which prepares financial statements to 31^st December) guaranteed a Ghs100,000 bank loan provided to Nora Ltd. Nora Ltd was in a strong financial position at 31^st December 2016, but this had worsened by 31^st December 2017 and it seemed likely on that date that Bruno plc would be required to honor its guarantee.

Explain how this guarantee should be treated in the financial statements of ABC Plc at 31^st December 2016 and 2017.

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